Moth.social is shutting down, and with it, one of the most high-profile VC-backed fediverse servers is shutting down too.
I can’t say this is entirely unpredictable because I don’t think there was a whole lot of room for VC-backed Fediverse servers. And what I mean by this is it’s not even so much that the culture of the Fediverse is anti-VC. I don’t believe that’s the case at all.
Frankly, I see a lot of folks on the Fediverse are also on Bluesky, which is VC-backed, and a good many of them are on Threads, which is run by Mark Zuckerberg. So it’s not as though people on the Fediverse are averse to VC-backed platforms.
The reason a VC-backed Mastodon server probably can’t survive is because VC is a land grab. When you invest in a VC, your goal is to 100x your ROI. The way you do that is by looking for an industry that is ripe for disruption—or destruction. Netflix, for example, wasn’t just disrupting movies and TV shows—it was destroying Blockbuster and video rental stores.
If I’m a VC entering the Fediverse, what am I disrupting? What am I destroying? I’m not disrupting legacy social media like Meta, which has already joined the Fediverse. ActivityPub integration with Threads was a defensive measure. If I were an investor in Meta, I’d applaud that effort.
If you’re starting a VC-backed Mastodon server, you’ve gotta ask, “What am I adding that lets me claim land?” You’re competing with 27,000 servers that don’t need to make a profit, answer to a board, or deliver ROI—they just need to exist.
Clearly, hosting your own Fediverse server isn’t the move for VC because there’s maximum risk and little land to grab. But that’s not to say there’s no room for VC investment—just not in hosting a server.
There are two opportunities if you’re a VC looking at the Fediverse. First, get into the hosting business. You’re competing with Amazon, but Amazon is a generalist, not specific to Fediverse hosting. A Fediverse hosting business has to add value Amazon can’t—like support. People need a panic button: “What do I do when my disk runs out of space?” Fully managed hosting is a huge opportunity.
Second, there’s customization. Most Mastodon servers are very vanilla. Few people customize the experience. Let’s say I’m a restaurant, and I want to deliver menu updates. A vanilla Mastodon server looks like a microblog, not a menu. What I’d want is a site where visitors, even those not on the Fediverse, can see a menu and order. Ordering—that is, making a transaction—is a feature missing from the Fediverse.
Another opportunity is NAS storage. The cost of storage is drastically reducing. Google One charges $30 a year for 200 GB. Over five years, that’s $150. A 256 GB SD card costs $30. A Raspberry Pi starter kit costs $75. So for $105, you have cheaper storage than Google’s subscription service.
Owning physical storage is drastically cheaper. NAS storage will only get cheaper. Right now, you can buy 10 TB of NAS storage for $500. Compare that to cloud subscription services. At some point, people will realize that running a server at home with a Raspberry Pi or NAS is super cheap.
The only barrier is the learning curve, but eventually, someone will make it dead simple. When that happens, small businesses, governments, and everyday users—not just nerds—will run Fediverse servers. Running a NAS will be as simple as using a smartphone, and the opportunities will be huge.
Most VC firms aren’t looking at these opportunities—they’re focused on AI, blockchain, and other trends. But at some point, someone will make it simple, and that’s where the potential lies.